By MARK LANDLER and MICHELINE MAYNARD
from The New York Times

DaimlerChrysler announced today that it will sell a controlling interest in its struggling Chrysler Group to Cerberus Capital Management, a private equity firm that specializes in restructuring

The deal unwinds a 1998 merger that was meant to create a trans-Atlantic automotive powerhouse.

“We obviously overestimated the potential of synergies,” Dieter Zetsche, the chief executive of DaimlerChrysler, said at a news conference here. “I don-t know if any amount of due diligence could have given us a better estimation in that regard.”

The agreement will leave DaimlerChrysler, based in Stuttgart, with a 19.9 percent stake in Chrysler but will free it of a great amount of pension and health care liabilities. Cerberus will take an 80.1 percent stake in the new company, to be known as Chrysler Holding.

With the deal, Chrysler becomes the first of the big Detroit automakers to be privately owned. The prospect of private ownership had alarmed Chrysler’s labor unions, which had come out strongly against the sale of the company, fearful that an investor might try to break up the company or seek deep cuts in wages and benefits.

But Ron Gettelfinger, the president of the United Automobile Workers union, said today that the deal “was in the best interests of our U.A.W. members, the Chrysler Group and Daimler.”

Of the $7.4 billion, Cerberus agreed to invest $5 billion in the new Chrysler and $1.05 billion in Chrysler’s financial arm. The remaining $1.35 billion will go to DaimlerChrysler.

read more at THE NEW YORK TIMES